The CFTC has filed and settled charges against Tenco, Inc, a futures commission merchant (“FCM”) based in Chicago, IL, for failure to diligently supervise employees and agents and for placing trades without proper authorization from the account holder. The FCM has been ordered to pay $140,000 and to create compliance and training programs to prevent violations in the future.
According to the CFTC order, a floor broker clearing trades at Tenco opened a trading account for a telephone clerk’s brother-in-law and allowed that clerk, without his in-law’s permission, to exercise discretionary authority over the account. This puts the telephone clerk in violation of CFTC regulation 166.2. Tenco is liable for this violation.
Furthermore, in February 2010, another telephone clerk brought this information to the attention of the Tenco President. According to the order, the FCM did not have adequate compliance programs in place regulating new accounts to prevent the opening of the in-law’s account as an accommodation to the floor broker. Tenco also failed to take any action when allegations were made that other clerks were trading in the floor broker’s personal account.
Ultimately, the CFTC says that “Tenco did not have a system in place to train employees in CFTC regulations, exchange rules or corporate policies, and thereby failed to diligently supervise the employees and accounts in issue.” Adequate compliance policies, procedures, and training are essential to above-board operation of any CFTC registrant, including FCMs.